Updated: Recovery Loan Scheme

Rishi Sunak announced on 27 October 2021 that the Recovery Loan Scheme (RLS) is being extended until 30 June 2022, along with further changes to eligibility and loan amounts.

The RLS scheme replaced the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).

Q. When does the Recovery Loan Scheme start and end?

The Recovery Loan Scheme launched on 6 April 2021 and is scheduled to close on 30 June 2022.

Q. Is my business eligible?

RLS is the one size fits all government-backed funding solution as UK businesses of any size can apply until 31 December 2021.

From 1 January 2022, only small to medium-sized enterprises can apply.

To be eligible the business must:

• Be a UK trading company.
• Be viable (or would be viable were it not for the pandemic).
• Have been impacted by the coronavirus pandemic.
• Not be in collective insolvency proceedings.

Q. What about personal guarantees and offering my home as security?

Lenders will not take personal guarantees on facilities up to £250,000, and lenders cannot take a borrower’s principal private residence as security.

Q. Can I apply for the Recovery Loan Scheme if I have had a Bounce Back Loan or borrowed under CBILS or CLBILS?

Yes, your business can apply for finance under the Recovery Loan Scheme (RLS) even if you have borrowed using one of the previous schemes.

Q. How much can I borrow?

The amount your business can borrow under the Recovery Loan Scheme depends on which type of finance you access.

From 1 January 2022, the maximum amount of finance available will be £2 million per business.

• You can borrow from £25,000 to £10m (per business) for term loans and overdrafts up until 31 December 2021.
• You can borrow from £1,000 to £10m (per business) for invoice finance and asset finance up until 31 December 2021.

The lender will assess affordability based upon your current trading and forecasts but you can expect any potential lending to be capped at the lesser of 2 times your annual wage bill or 25% of annual turnover or your liquidity needs for the coming 12 months.

Existing borrowing via government loan schemes (BBLS/CBILS/CLBILS) will count in the calculation above and may limit how much further finance you can raise.

Q. How long can I borrow the money for?

Term lengths vary depending on what type of finance you opt for.

• You can borrow for up to six years for term loans and asset finance facilities.
• You can borrow for up to three years for overdrafts and invoice finance facilities.

Q. What is the main difference in the Recovery Loan Scheme compared to the schemes it replaces (i.e. BBLS, CBILS and CLBILS)?

There are two key differences:

• Interest and fees – you will pay interest and arrangement fees from day one under the Recovery Loan Scheme.
• Loan size – there is no turnover restriction under the Recovery Loan Scheme, but the maximum loan amount is now capped at £10m.

Q. What is the government guarantee?

From 1 January 2022, lenders can only recoup 70% of the outstanding loan value.

The Recovery Loan Scheme operates in a similar way to the previous loan schemes with the government giving lenders an 80% guarantee. If a business were to default on its loan, the lender can recoup 80% of the outstanding value of the loan from the government up until 31 December 2021. This guarantee should give lenders increased confidence to lend to businesses.

Q. What can the funds be used for?

For any legitimate business purpose, including managing cash flow, investment, and growth.

Q. Which lenders are taking part in the new Recovery Loan Scheme?

The British Business Bank has released the initial tranche of lenders and more will be added in the coming weeks. The current list is available here.

Q. Where can I find the up to date list of questions & answers on the British Business Bank website?

You can find this information here.

If you would like to discuss eligibility for this loan, do speak with your usual Kreston Reeves contact, or John Walsham.